Some Better News From Europe

June 30, 2010

At the ECB’s 3-month tender, banks only requested EUR 131.9 billion of liquidity to replace EUR 442 billion of maturing one-year funds.  This lower-than-projected amount results in a EUR 310 billion net withdrawal, suggesting banking sector strains may not be as severe as imagined. 

British business investment last quarter rose 7.8% and was 7.7% lower than in 1Q09.  Both comparisons were better than forecast.  The release of revised U.K. GDP and current account data, originally scheduled for today, was postponed until July 12.

One day after Tuesday’s bloodbath, Stocks in Europe have so far risen 2.4% in Spain, 0.8% in France, 0.7% in Great Britain, and 0.6% in Germany.  Earlier today, equities closed with further losses of 2.0% in Japan, 1.1% in China, 1.3% in Taiwan, 1.0% in Australia, and 0.6% in New Zealand and South Korea.  Stocks rose 1.0% in India and 0.7% in Indonesia.

The dollar relinquished 0.8% against the euro, 0.7% relative to the Australian dollar, 0.5% against the loonie, 0.3% versus the kiwi, 0.2% against the Swissy, and 0.1% against the yuan.  The dollar shows small gains of 0.2% relative to sterling and 0.1% against the yen.

The yield on 10-year gilts fell another four basis points, and that on 10-year JGBs slid below 1.10% to 1.09%, lowest since 3Q03.

Oil and gold have firmed 0.8% and 0.2% to $76.54 per barrel and $1245.10 per troy ounce.

German unemployment dropped 21K in June, not quite as much as projected.  The jobless rate stayed at 7.7% (6.6% in the old West German states).  Unadjusted unemployment fell by 88K and to 7.5% from 7.7%.

The British Nationwide house price index edged up 0.1% in June and posted a smaller on-year advance of 8.7% after 9.8% in the year to May.  British consumer confidence weakened a point to minus 19 in June; analysts had feared a two-point deterioration.

The preliminary indication for on-year euro area consumer price inflation is 1.4% in June, down from 1.6% in May.  Analysts were expecting 1.5%.

Italy’s business sentiment index slid for the first time since September, but the drop to 96.1 from 96.4 was no greater than forecast.  Italy also reported a 0.5% increase in producer prices in May and 3.8% from May 2009.  Consumer prices were flat in June and up just 1.3% from a year earlier.

The Swiss index of leading economic indicators improved more than forecast to 2.25 in June from 2.16 in May.

Swedish wages rose 1.8% on year in April after gaining 2.4% in the year to March.  Danish GDP advanced 0.5% in the first quarter but was 0.4% lower than a year earlier.  Norwegian retail sales dipped 0.1% in volume terms last month and were 3.0% lower than in May 2009.

Russia’s central bank did not cut its 7.75% refinancing rate further.  Interest rate decisions are awaited from central banks in Romania and Poland later today.  Neither is thought likely to modify policy.

Hungarian producer prices rose 3.8% in May and 5.5% on a 12-month comparison.  Hungary recorded a EUR 344 million current account surplus in 1Q10.

Japan’s manufacturing purchasing managers index slid to 53.9 in June from a four-year high of 54.7 in May.  An average reading of 54.1 in 2Q10 was the best quarterly score since 3Q06 and indicates decent economic growth.

Japanese housing starts in May were 4.6% lower than a year earlier following an on-year uptick of 0.6% in April and a drop of 2.4% in the year to March.  The result was weaker than expected.  However, a 9.2% on-year rise of construction orders beat forecasts.  This data series has traced a very volatile path so far this year.  Japanese wage earnings were 0.2% lower in May than a year earlier.  Motor vehicle output in May was 27% greater than a year before.

Industrial production in South Korea rose 2.6% on month in May and by 21.5% from a year earlier.  That’s a bit stronger than forecast.  The index of leading economic indicators was 8.0% greater in May than a year earlier after an 8.6% increase in the year to April.

Thai industrial output surpassed its year-earlier level by 17.2% in May, down form a 21.8% gain in April.  Capacity usage increased to 67.3%.  Thailand posted a $2.3 billion trade surplus in May, as on-year export growth accelerated to 42.5% from 34.7%.  There was a $1.04 billion current account surplus.  Business sentiment in this economy improved to 49.9 in May from 46.0 in April.

Hong Kong M3 growth slowed sharply to 4.4% in May.

South African M3 and credit grew 1.4% and 0.8% in the year to May.

Australian skilled job vacancies fell 0.3% in June.  New Australian home sales posted a 6.4% monthly decline in May.

Turkey’s GDP growth slowed to 0.1% last quarter from 2.3% in 4Q09.

Southern Mexico suffered a 6.2 earthquake overnight, and Tropical Storm Alex in the Gulf of Mexico was upgraded to hurricane status.

A German parliamentary vote today to elect the country’s next president is expected to be a good barometer of Chancellor Merkel’s hold on political power.  The job of president is akin to a head of state, rather than chief executive.

In the U.S., investors await the ADP private employment estimate and mid-western purchasing manager survey readings in manufacturing.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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